Big banks including JPMorgan Chase ( JPM), Citigroup ( C) and Wells Fargo ( WFC) have been ramping up their foreclosure activity in recent weeks. Some banks had held off in the latter part of 2008 and early this year from placing delinquent borrowers into foreclose status as they waited to hear more details about President Barack Obama's housing rescue plan. But the banks have recently lifted their internal moratoriums and are now deciding which borrowers will be candidates for aid, while others will be moved through foreclosure, according to The Wall Street Journal. Foreclosure sales have been rising this year, the article says, citing data from LPS Applied Analytics. Fannie Mae ( FNM) and Freddie Mac ( FRE) have also increased sales of foreclosed homes since their moratoriums ended on March 31, the Journal says. As part of Obama's Homeowner Affordability and Stability Plan, the administration is allotting $75 billion to help keep three to four million of at-risk borrowers in their homes. Among other things, the plan provides several incentives for mortgage servicers that aid borrowers. But despite efforts by the Obama administration to ease borrowers being foreclosed on their homes, many troubled loans will still wind up in foreclosure if the borrower does not have sufficient income to make even a reduced mortgage payment or they don't respond to communication requests from their servicer, the article says. The foreclosure process could be another wrinkle as banks struggle to boost earnings this year. First-quarter earnings reports will be largely devoid of charges from foreclosed properties -- at least at banks that imposed moratoriums. But as the banks jumpstart the process again, the second quarter is likely to see more charges related to foreclosures.
Even more worrisome is the toll that the down economy takes on borrowers struggling to make mortgage payments. The most recent unemployment numbers say that workers out of a job spiked to 8.5% last month. As more workers are laid off, more will find themselves unable to make payments on their mortgages, even with loan modifications. JPMorgan Chase is set to kick off the majority of bank earnings when it reports on Thursday, followed by Citi on Friday, Bank of America ( BAC) on Monday and Wells Fargo on April 22.